The work-related costs scheme (WKR)

the work related costs scheme wkr

How can an employer give a tax-free allowance or benefit to an employee?

Figures 2023

The work-related costs scheme is a tax regulation in force in the Netherlands from 2011, under which the allowances and benefits in kind that employers give to their employees can remain tax-free to a certain extent. The aim of the WKR is to reduce administrative burdens and simplify the regulation of allowances and benefits in kind given to employees. However, whether this goal has been achieved is highly questionable. The scheme is still proving difficult to implement for many employers. In this memo, we will discuss the work-related costs scheme. The treatment of most allowances and benefits in kind will be discussed but we will not go into detail everywhere.

Legislative system

Wage concept

The Wage Tax Act 1964 states: ‘wages are all that is enjoyed from present or past employment, including what is paid or provided in the context of the employment’.

Non-employment benefit

In addition to the relationship of employer and employee, one or more other relationships may exist between the two parties. Benefits that do not result from the employment relationship, also taking into account social attitudes, do not constitute wages.

Examples include:

  • compensation for damages caused by an industrial accident;
  • damages for damage to reputation and honour;
  • compensation for immaterial damages;
  • winning a prize;
  • the provision of a funeral wreath on a death or a fruit basket to a sick employee;
  • personalised birthday or birth present (up to € 25).

Intermediate costs

Costs incurred by the employer for the benefit of third parties, which the employee advances and recovers, are not covered by the wage concept. Such costs are classified as intermediate costs.

Examples given in the parliamentary debate on intermediate costs:

  • purchase costs of items that become part of the employer’s assets or costs incurred for items that already belong to the employer’s assets;
  • costs specifically related to the running of the business and not specifically related to the employee’s performance;
  • felt-tip pens for writing on a whiteboard at a meeting that the employee advances or the employee standing at a trade fair on behalf of the employer and advancing costs there;
  • having dinner with (potential) clients or going to a football match together.

No wage

Under the Wage Tax Act 1964, certain entitlements, benefits and allowances are excluded from wages.
These include (subject to conditions):

  • pension claims;
  • entitlements to an early retirement scheme;
  • claims under certain employee insurance schemes;
  • claims for death or disability benefits due to an accident;
  • claims for death benefits or benefits in kind;
  • entitlements to leave;
  • entitlement to transition allowance;
  • benefits to cover damages suffered;
  • death benefits (up to a maximum of 3 monthly salaries on the death of an employee, his/her partner or (foster) child);
  • fund exemption;
  • service time exemptions (1 month’s salary at 25 years’ service and 1 month’s salary at 40 years’ service);
  • contributions regarding statutory health insurance.

For entitlements that are not counted as wages, however, the benefits can be taxed. It just means that the employer does not have to withhold wage tax already during accrual but can defer it until the moment actual income is paid out.

In principle, therefore, all reimbursements, provisions and benefits in kind, including those that are 100% business-related, belong to wages from employment. It must then be assessed whether the allowance or provision in question is not exempt in the sense that it is not wages. If it does not belong to wages, that is the end of the matter. If the reimbursement or allowance does belong to wages, it must first be determined whether the reimbursement or allowance may be exempt. In some cases, the reimbursement or allowance is indeed salary but is valued at nil – with or without conditions. It must also be determined whether the allowance or provision in question can be designated as a final taxable benefit. If the allowance or provision in question cannot be designated as a final taxable benefit, the allowance or provision will be taxed at the employee’s expense. If it is decided to designate the allowance as a final taxable benefit, it will have to be assessed whether a targeted exemption applies. If this is not the case, the allowance will fall within the free space. If this space is exceeded, the employer will have to pay 80% final tax levy on the excess.  

The free space

In 2023, employers will have a free space to spend of 1.92% on the first € 400,000 of taxable wages and 1.18% on the taxable wages above € 400,000. As described before, there are a number of allowances and benefits in kind that do not belong to wages, for which a targeted exemption applies or for which a nil or flat-rate valuation applies. With the exception of the lump-sum valuations, the other reimbursements and benefits in kind, which do not constitute wages or for which a targeted exemption or nil valuation applies, do not affect the employer’s free space.

Employers belonging to a group can choose to apply the work-related costs scheme at group level. Under this scheme, at group level, it is assessed whether the free space is exceeded. If that is the case, the employer within the group with the largest wage bill for that calendar year will have to pay the final tax levy.

Exceeding the free space

The moment the free space of the taxable wage bill is exceeded, 80% final tax levy has to be paid by the employer on the excess.

Mandatory wage

A number of allowances and benefits in kind are exempt that cannot be designated as a final taxable benefit and therefore cannot be placed in the free space. The items belonging to this mandatory wage are:

  • a car made available also for private purposes;
  • a residence, except for housing outside the employee’s place of residence;
  • fines imposed by a criminal court and sums of money paid to the state to avoid criminal proceedings, administrative fines, fines based on disciplinary law as well as certain costs mentioned in the Municipalities Act (parking tax and wheel clamp costs);
  • crimes for which the employee has been convicted by a Dutch criminal court by irrevocable judgment;
  • weapons and ammunition, unless it is recognised, licensed or exempted under the Arms and Ammunition Act;
  • animals against which irrevocable administrative or criminal measures have been taken;
  • the interest benefit of a money loan granted by the employer to the employee and the costs associated with this loan;
  • penalties.

Designate as a final taxable benefit

The employer can designate allowances and benefits in kind for active employees as final taxable benefits. The choice whether or not to designate one or more wage components need not be made known to the tax authorities. The actual actions of the employer are decisive in determining the tax consequences of providing or reimbursing a particular wage element.  

The choice should be evident from the employer’s records. If it is a wage, this will be evident from the payroll records. If the allowance or benefit in question is designated as a final taxable benefit, this will be evident from the financial records where the final taxable benefit is processed and will not be included in the payroll records. In practice, there will usually be an agreement between employer and employee on the salary and the reimbursements and allowances, which will often indicate whether the reimbursements and allowances are designated as a final taxable benefit (and therefore on behalf of the employer). If a CAO (Central Labour Agreement) applies, it will include agreements as well as the consequences of those agreements.

The choice made is final but any mistake made can be rectified. It is of course still possible to make new agreements between employer and employee for each pay period.

To avoid discussions about whether something has been designated as a final taxable benefit, it is advisable to explicitly include in the personnel handbook or personnel regulations, which often include the fringe benefits, that the employer has decided to designate the following wage elements as final taxable benefits for the year in question. This creates clarity for the employer and the employee, as well as for the tax authorities. This is all the more true if the company’s financial accounts are kept abroad, as there will be less knowledge of the work-related costs scheme abroad, which may lead to more errors in the administrative processing.
If there is a targeted exemption, it is assumed that these wage components have been designated.


When applying the work-related costs scheme, the following order of precedence applies:

  • determine whether something should be included in wages;
  • apply an exemption;
  • valuation of wages;
  • determine allowances and benefits in kind that have not been designated by the employer as a final taxable benefit or that cannot be designated;
  • establis allowances and benefits in kind that have been designated by the employer as a final taxable benefit:
    • a targeted exemption;
    • the free space;
    • insofar as not exempt and also not fitting in the free space, calculation of 80% final tax due by the employer.

Customary test

The freedom to designate reimbursements and allowances as a final taxable benefit is limited by the customary test. This means that these reimbursements and allowances may not deviate by more than 30% from what is usual for other employees at the same employer or at comparable employers.
The policy of the tax authorities is that putting real wages, to the extent that they do not exceed € 2,400 per employee per year, into the free space is not considered unusual.

The Supreme Court has ruled the following with regard to the customary test.

  • The nature of the wage component is irrelevant. This means that pure wages, such as bonuses, can also be charged to the free space.
  • The tax authorities must prove plausibly that designation of the wage element is unusual. However, it is unclear how this burden of proof can be met.
  • In any case, the tax authorities do not meet the burden of proof by referring to their target limit of € 2,400.

In order to determine whether the customary test is met, a comparison should be made with the other employees of the same employer, with colleagues of the same employer within the same job group and with employees of other employers.

Targeted exemptions

A targeted exemption ensures that certain costs remain tax-free for the employee. This means that these costs are not included in the maximum amount that the employer may compensate or provide tax-free to its employees within the tax-free allowance.

Exemptions are specifically intended for expenses that have a direct relationship with the employment and whose private benefit to the employee is limited.
Moreover, the employer must designate the allowances and benefits in kind in the payroll records as final taxable benefits to make use of the targeted exemptions. It is therefore important that the employer does so, as otherwise these allowances and benefits in kind are in principle wages for the employee and wage taxes are due on them.

Below is an overview of the targeted exemptions in the work-related costs scheme and how these costs will be treated for tax purposes in 2023.

Travel costs

Within the work-related costs scheme, there are several options for reimbursing travel expenses. Each mode of travel has its own tax treatment and conditions. Below is a detailed explanation of the various options.

When an employee travels by public transport, the employer may provide or reimburse the employee for the cost of this tax-free. This applies to train, bus, tram and metro. In addition, the actual costs of a taxi, airplane or ship can also be reimbursed tax-free.  

For transport by other means, such as private car, motorbike or bicycle, the employer may provide a tax-free allowance of up to € 0.21 per kilometre. A fixed allowance may be provided for commuting-related travel costs. The condition is that the employee travels to a fixed place of work on at least 128 days per calendar year. If that is the case, the fixed allowance may be calculated as if the employee travelled to the same place of work on no more than 214 days per calendar year. The fixed allowance then amounts to a maximum of 214 days x travel distance from home to the workplace x 2 x € 0.21 per kilometre. Multiple travel on one day, for example going to lunch at home, is regarded as commuting and is therefore business-related.

Since 1 January 2022, it is also possible to pay a tax-free working from home allowance if the employee works from home. On home working days, no tax-free travel allowance can then be provided. Therefore, if the employee works from home on a structural basis, the 128-day rule must be applied pro rata with regard to both the fixed commuting allowance and the working from home allowance.

Incidentally, when travelling by public transport, the employer has a choice: tax-free reimbursement of actual costs or reimbursement of up to € 0.21 per kilometre.

Transport on behalf of the employer

If transport is involved on behalf of the employer, it is not possible to make use of this targeted exemption to pay employees a tax-free allowance. This is the case if:

  • the employer organises the transport itself, for example by running a bus or having employees picked up and dropped off at home by a chauffeur-driven car;
  • the employer itself buys the tickets for travelling by public transport and provides them to the employee, such as a public transport annual card or route card.
  • the employer provides a company car or bicycle.

Carpooling is not considered as transport on account of the employer. In such a situation, the employees are all entitled to the commuting allowance agreed with the employer, regardless of who is driving and regardless of whether driver compensation is mutually agreed upon.

Excess compensation

It happens in practice that a reimbursement of more than € 0.21 per kilometre is given, especially for business kilometres. The part of the allowance up to and including € 0.21 can then be designated as a final taxable benefit (to which the targeted exemption applies) and the excess is then taxed as wages to the employee. It is then also possible to place this excess in the free space and thus make it tax-free for the employee. In that case, however, free space must be available and the excess should be regarded as a final taxable benefit.

Costs of temporary accommodation and business meals

This targeted exemption includes the costs of overnight stays as part of employment, as well as meals and other costs such as these. It is important that the business nature is prominent. This means that tea outings and staff meetings (outside the Netherlands) may also fall under this exemption. The assessment of the costs as business must then be well documented. For example, it is important how a trip is presented, that there is (some) business activity, in case of a trip abroad that there is a business reason to go abroad and that staff is paid throughout the trip and that there is a temporary stay as part of the employment.

Meals consumed at the permanent workplace are not covered by the exemption.

Maintenance and improvement of knowledge and skills (study costs)

This targeted exemption covers the costs of maintaining and improving knowledge and skills to perform the job, including registration in a professional register, as well as outplacement.

The costs of attending a course or training aimed at keeping knowledge up to date (both refreshing and expanding or supplementing knowledge) are covered by this exemption. Professional literature also falls under this exemption where it does not matter whether the professional literature is received at the workplace or at home.

Following study or training

A targeted exemption applies to following a training course or study aimed at acquiring income from work. This applies if the training or study is aimed at fulfilling a profession in the future. The point is that there is an objective expectation that the employee can use the knowledge acquired through the training or study in economic transactions. The training or study must take place under the (some) guidance or supervision of a third party.

Costs related to a study room and its furnishings are not covered by the targeted exemption.

The targeted exemption also applies to the reimbursement or provision of training to former employees, insofar as such training relates exclusively to undergoing training or study with a view to earning income.

Additional costs temporary stay outside country of origin

This concerns the reimbursement of so-called extraterritorial costs (ET costs).

Extraterritorial costs include:

  • the additional cost of living due to a higher price level in the working country than in the country of origin, such as additional expenses for meals, gas, water and electricity;
  • the cost of an introductory trip to the country of work, possibly with the family, to look for housing or a school, for example;
  • the cost of applying for or converting official personal papers, such as residence permits, visas and driving licences;
  • the cost of medical examinations and vaccinations for the stay in the working country;
  • duplicate accommodation costs, as the employee continues to live in the country of origin, e.g. hotel costs;
  • the (initial) housing costs: –
    if housing is provided, only the housing costs that exceed 18% of wages from present employment are extraterritorial costs, the rest of the costs are wages; –
    if the employee rents himself, the employer may apply the 18% calculation method to provide the excess freely;
  • the cost of storing the part of the estate that is not moved to the country of work;
  • travel costs to the country of origin, e.g. for family visits;
  • the additional costs of having the income tax return completed if this is more expensive than having the return completed by a comparable tax advisor in the country of origin (a maximum of € 1,000 per employee applies here);
  • course costs to learn the language of the country of work for the worker and family members staying with him;
  • the additional (non-business) call charges for making calls to the home country;
  • the cost of a social security exemption application (A1 statement);
  • school fees for an international school or for an international section of a mainstream school.

Do not qualify as extraterritorial expenses:

  • agency allowances, bonuses and similar allowances (foreign service premium, expat allowance, overseas allowance);
  • capital losses;
  • the buying and selling costs of a property;
  • compensation for higher tax rates in the country of work (tax equalisation).

30% ruling

An employee posted abroad or to the Netherlands, instead of being reimbursed for the extraterritorial costs actually incurred, may under certain conditions qualify for a special expense allowance, the 30% ruling. This scheme means that, if granted by the tax authorities, up to 30% of the wages from current employment in respect of the stay outside the country of origin including the allowance, or 30/70 of the wages excluding the allowance, will count as a tax-free allowance for the extraterritorial costs. In addition, the employer may reimburse school fees for an international school tax-free.

The advantage of the 30% ruling is that the actual costs do not need to be demonstrated. However, if it can be demonstrated that the actual extraterritorial costs exceed 30% of the salary including the allowance, the actual costs may be reimbursed. No standards or restrictions apply to this.

From 1 January 2024, the 30% ruling will be capped at 30% of the norm from the Top Income Standardisation Act.

Moving expenses

Relocation allowances are exempt if the move is related to employment and designated as a final taxable benefit.
The targeted exemption applies to the cost of moving the household effects, plus an amount of € 7,750.

In any case, there is a business move if, within two years of accepting a new job or transferring within the existing job, the distance between the home and the place of employment is reduced by at least 60% due to the move. In addition, the condition applies that before the move, the distance between the home and the place of employment was at least 25 kilometres. The distance should be measured by the most usual route. If the conditions are not met but a business relocation is nonetheless involved, this will have to be demonstrated.

Tools, computers and telephones

A targeted exemption applies to tools, computers, mobile communication devices and similar equipment which, in the reasonable opinion of the employer, are necessary for the proper performance of the employment. This also includes the associated data transport and software and the like required for use in the scope of employment.

A condition for this targeted exemption is that the employee must return the provision or reimburse the fair market value if the provision is no longer necessary. If this is not the case, the employee receives a benefit that must be included in the salary. The employer may then decide to designate it as final taxable benefit and include it in the free space.

Necessity criterion

The necessity criterion requires the employer to make a plausible case per employee or group of employees that a particular provision is necessary.
Indications that a facility is necessary for the proper performance of employment are:

  • actual use;
  • the extent of use;
  • who decides which tool or ICT resource to purchase.

If an employee wants a more expensive provision than the employer deems necessary, the targeted exemption will still apply, but not for the additional costs.

Workplace facilities

This targeted exemption covers allowances and provisions of resources that are entirely or almost entirely (90%) used or consumed at the workplace, but which can also be used elsewhere and are entirely or almost entirely used for business purposes. The term ‘resource’ is broader than the term ‘tool’.

Health and safety facilities

Health and safety facilities are specifically exempted if these facilities are necessary for the performance of employment and the employer provides these facilities at the workplace.

Based on the Working Conditions Act, every employer is obliged to draw up a health and safety plan that must include a risk inventory and risk assessment. The plan must also state how the employer intended to reduce or even eliminate health and safety risks. Matters arising directly from the occupational health and safety plan to reduce said risks fall under this targeted exemption.

Examples of items covered by this exemption are:

  • insulating clothing when working in a cold store;
  • safety glasses for a lab technician or welder;
  • safety shoes;
  • sunglasses for a driver or pilot;
  • a mandatory medical examination;
  • pre-employment examination;
  • a medical or occupational health examination, a second opinion or a flu shot as part of prevention and absenteeism policies;
  • an employer-initiated prevention and health programme;
  • a first aid course reasonably included in the occupational health and safety plan;
  • chair massage (subject to conditions);
  • smoking cessation course.

The facilities must be directly related to the employer’s obligations under the Working Conditions Act. So the employer cannot simply decide to include all kinds of facilities in the health and safety policy, so that their provision, reimbursement or provision is exempted as a health and safety provision (such as bicycles, healthy meals, fitness outside the workplace, etc.). In a court case at the Supreme Court the Advocate General however advised in May 2023 that healthy meals can be considered part of the health measurements of an employer and thus should be provided tax-free. We have to wait what the Supreme Court will rule.

Pursuant to the Working Conditions Decree, the furnishing of the home workspace must be arranged in such a way that an employee can carry out his work in a sitting position and in an ergonomically sound manner as much as possible, and use effective artificial lighting. This includes the desk, desk chair and lighting.
The cost of meals, coffee, tea and fruit cannot be reimbursed or provided tax-free to the home worker. With the exception of health and safety provisions, the home office is not a workplace for the purposes of the Wage Tax Act. However, these expenses can be placed in the free space.

Products from our own company

If employees buy products from the employer’s company, the employer can partially reimburse or provide those products tax-free under certain conditions. This also applies if the products are from the company of a company affiliated to the employer (1/3 interest).

The conditions for this scheme are:

  • They must be industry-specific products. Items that have been used in one’s own company and sold to staff at a discount after the end of the period of use are not covered by this scheme.
  • The discount may not exceed 20% of the fair market value of the product with a maximum of € 500 per calendar year. This amount may not be saved and carried forward to a subsequent calendar year. With regard to ‘fair value’, the lowest price the employer can find for the product in the market or on the internet may be used. Any exceeding of the € 500 limit means that the amount by which the limit is exceeded can be designated as a final taxable benefit by the employer against the free space.

This scheme is intended to be used only for consumption purposes; not for employees to start a trade. Further, this scheme does not apply to cash loans.

Certificate of good conduct (VOG)

There is a targeted exemption for the reimbursement of a Certificate of Good Conduct, which is a requirement for some professions in order to be employed.

Working from home allowance

Employers can provide homeworkers with an allowance to cover certain additional costs of working from home such as the extra costs of water and electricity use, heating, coffee, tea and toilet paper. This allowance will be a flat rate of € 2.15 per homeworking day or part of a homeworking day in 2023. It is not possible to reimburse the actual costs tax-free if they exceed € 2.15 per day. This does not include costs related to furnishing the workplace at home. These are covered by the aforementioned targeted exemption for health and safety facilities.

It is not possible to apply both the targeted working from home allowance and the targeted commuting allowance to the same day. This also applies if a car is provided and on one day the car is used to travel to the fixed place of work. However, combination is possible if work is done at home on the same day and travel is undertaken from home to a non-fixed workplace on that day.

It is assumed that employee and employer agree on the number of home working days. As with the fixed commuting allowance, if an employee works at home at least 128 days per calendar year, it may be assumed that 214 days per calendar year are worked from home when determining the working from home allowance. And that a pro rata is then applied depending on the number of days per week worked from home.

Any occasional deviations do not lead to an adjustment of the fixed working from home allowance. Naturally, the working from home allowance should be adjusted in case of a structural change in the number of days worked from home. The pro rata calculation should be recalculated time-wise in case the allowance starts or ends during the calendar year.

Fixed expense allowances

Under the work-related costs scheme, it is possible to provide fixed expense allowances to employees without being charged to the free space or being included in wages. In short, this means that it is only possible to provide a fixed expense allowance that relates to intermediate costs and/or items that are exempted for specific purposes. If other costs are also included in such a fixed expense allowance, the amount relating to those other costs is taxed, or can be included in the free space space, provided this is customary. A condition for the fixed tax-free allowance is that it is based on an investigation into the actual costs. In practice, this means that such a survey is conducted over a continuous period of three months among a representative number of employees.

The reimbursement must be specified per cost category by nature and assumed extent. It does not have to be costs that recur regularly. Costs that are variable in amount and do not occur regularly can also form part of a fixed expense allowance.

During periods of absence (such as holidays or illness), payment of the fixed expense allowance does not have to stop immediately. Normally, a fixed expense allowance may continue to be paid tax-free during the month in which the absence starts and the following month. If the employee is still not working after that period, at least the variable part of the fixed expense allowance should be stopped.

An employer may match the allowances that civil servants receive for business trips if the employer can make it plausible that the employees are in the same circumstances as civil servants on business trips from a cost perspective. The employer may then match the net amounts set out in the CAO Rijk in the relevant table.

The following amounts apply for 2023:

Cost typeCentral government collective labour agreementTax-free 2023 Taxed 2023
Evening meal28.8427.970.87
Small spending day6.345.660.68
Small spending evening18.9111.327.59

The column ‘tax-free 2023’ shows the maximum amounts that the employer can offer targeted exempted reimbursements, which apply to all employers. These are lower than the standard amounts mentioned in the CAO Rijk, see the column ‘ Central government collective labour agreement’ in the table above. If the employer reimburses more than the amount in the column ‘tax-free 2023’, he can include the excess part of the reimbursement in his employee’s salary or designate it as final taxable benefit and place it in the free space.

The same applies to foreign business trips, except that these allowances are tax-free.


Separate rules apply to wages in kind. Furthermore, a number of allowances and benefits in kind must be valued at nil. There is also a group of reimbursements and benefits in kind for which a fixed valuation applies.

The starting point is that the valuation of wages in kind is at fair value. The invoice value (selling price including VAT) applies in all cases where the wage in kind is obtained from an independent third party.

Lower valuation

The work-related costs scheme stipulates that for certain non-cash wages, the valuation may be calculated at a lower amount than the fair value.

Nil valuations

Provision of workplace

The following provisions are valued at nil if they are used or consumed at the workplace, other than the home workplace.

  • facilities for which it is not customary to use or consume them elsewhere;
  • refreshments, in fairness, not part of a meal;
  • clothing provided;
  • housing and accommodation.
Facilities for which it is not customary to use or consume them elsewhere

These facilities include the enjoyment of workplace furnishings in a broad sense and parking space on the employer’s premises. Furnishings should include the following:

  • the fixed PC;
  • the landline phone;
  • gym in the workplace;
  • the swimming pool in the workplace;
  • the coffee machine;
  • printer;
  • paper and stationery;
  • staff parties, anniversary celebrations and receptions held at the workplace.
Refreshments, in fairness, not forming part of a meal

Refreshments consumed at the workplace are covered by this nil valuation. There is no requirement that the refreshments are consumed during working hours.

Clothing provided

Clothing provided is valued at nil if:

  • the clothing is (almost) exclusively suitable to be worn during the performance of employment;
  • the clothing (per item) bears one or more clearly visible logos linked to the employer with a combined surface area of at least 70 cm2 and the clothing is made available for business use at the workplace;
  • clothing left at the workplace.
Housing and accommodation

The nil valuation also covers housing and lodging for employees, provided that this takes place in the context of fulfilling the employment relationship, the employee does not live at the workplace and cannot reasonably avoid this facility such as, for example, overnight stays on board sea-going vessels, on drilling rigs, standby services in hospitals or fire brigades, or sleeping services in healthcare.

Free travel

The provision of the right to free travel on public transport is valued at nil under certain conditions. This provision concerns public transport cards and economy cards. There is a requirement that the card also serves for business travel (including commuting) and is used in the context of employment. The nil valuation does not apply to the situation that the costs of public transport are reimbursed. For that, the aforementioned targeted exemption applies.

Staff loan interest

Under conditions, the interest benefit of a loan granted by the employer to an employee can be valued at nil.

This nil valuation applies to loans for the purchase of a bicycle and to loans for the purchase of an electric bicycle or scooter.

Flat-rate valuations

Workplace flat rate

The following wage components are valued at a flat rate if they are used or consumed in whole or in part at the workplace:

  • meals;
  • housing and accommodation;
  • childcare.

The flat-rate valuation for meals is € 3.55, regardless of what kind of meal it is: a coffee meal or a hot meal. No matter where the meal is consumed.
It can be argued that if the actual costs are lower than the lump sum, then the actual costs will be adhered to. This may be the case if the employer buys bread, butter and spreads from the supermarket and the employees make their own sandwiches.

If employees pay a personal contribution for meals, this will be deducted from the standard amount. The remaining amount may not fall below zero as a result.
Does the employer include the meals eaten in the canteen in the free space? Then he does not have to administer these per employee. He only needs to add up the meals of all employees and multiply this number by the standard amount.

Housing and accommodation

The valuation of housing and accommodation at the workplace, such as on a drilling platform or aboard a ship, is € 6.10 per day. This standard amount includes any enjoyment of energy, water and washing.


The value of childcare at the workplace, which is organised by the employer, is set at the number of hours of childcare received multiplied by the hourly rate, determined in accordance with the Childcare and Nursery Care Quality Requirements Act. If childcare is provided by the employer at a location other than the workplace, this valuation does not apply and the fair market value or invoice value must be reverted to.

Car provided – company car

If the employer provides the employee with a car as part of the employment relationship, it must include the employee’s benefit due to private use of the car in the payroll administration.

In general, 22% (or 35% for cars 15 years or older) of the car’s catalogue value should be added to the employee’s salary as a benefit. An employee’s own contribution may be deducted from this.

Cars with CO2 emissions of zero grams per kilometre will in 2023 have an additional taxable value of 16% on a catalogue value of up to € 30,000 and an additional taxable value of 22% on the excess. For electric cars with integrated solar panels and hydrogen cars, the addition will be 16% of the catalogue value with no maximum.

If the employee demonstrably drives the provided car 500 kilometres or less privately on an annual basis, the value of the benefit is zero. It is strongly recommended to keep a comprehensive trip record to prove this. The employee can ask the tax authorities for a ‘Statement No Private Car Use’ and hand it to the employer. In principle, the risk then lies with the employee if it turns out that the car was used more than 500 kilometres for private purposes. Fines can then also be imposed.

Provision of bicycle

A flat-rate addition of 7% of the value of the bicycle applies to a bicycle made available if the bicycle may also be used for private purposes. An employee’s own contribution is deducted from the addition. There is a legal presumption of private use if the bicycle is also provided for commuting purposes.


An employer can choose whether to check if the allowances and benefits in kind exceed the free space per payroll tax return period or after the end of the year. In practice, almost every employer chooses to do this after the end of the calendar year. This must then be done no later than in the wage tax return for the second period of the following calendar year. This means that there must be a link between the payroll records and the financial records. Costs must be calculated including VAT. So this must also be taken into account in the administration in one way or another.

The most ideal accounting treatment would be if general ledger accounts were used for the various allowances and benefits in kind such as:

  • intermediate costs;
  • targeted exemptions;
  • nil valuations;
  • costs for which a different valuation applies;
  • designated costs for final taxation (free space on which 80% final taxation is due if that space is exceeded);
  • expenses not designated for final taxation (regular wages).

To further complicate things administratively, it should also be taken into account that the work-related costs scheme applies in principle only to wages from current employment and therefore not to allowances to post-active employees and non-employees.


A company has 50 employees. The total wage bill is € 1,000,000. 5 employees participate in a bicycle scheme where a bicycle worth € 1,700 is provided partly for commuting. In return, these employees have waived future wages at € 100 per month for 17 months. A staff party was held at an external location at a cost of € 10,000. All employees enjoy an in-house product benefit of € 500 per year. 15 employees have a company mobile phone and need it for work. Its cost is € 18,000 per year. At Christmas, all employees receive a Christmas gift worth € 35.


Nature of reimbursement/provisionSituation designatedSituation not designated
Bike€ 8.500€ 8.500
Staff party€ 10.000€ 10.000
Product from own company€ 0€ 25.000
Mobile phone€ 0€ 18.000
Christmas gift€ 1.750€ 1.750
Total€ 20.250€ 63.250
Less: free space€ 13.880N/A
To be charged€ 6.370€ 63.250

By exceeding the free space, in case all wage components are designated, a final tax levy is due of € 5,096 (80% times € 6,370).

If nothing is designated as a final taxable benefit, all reimbursements and allowances are wages. About € 23,358 in wage tax will then be due on the amount of € 3,250. Depending on the agreements between the employees and the employer, the benefit may still need to be grossed up. This would amount to around € 37,032.
The example shows that designating it as a final taxable benefit is generally more advantageous than taxing it as grossed-up wages to employees. Especially with employees who fall in a higher rate. Moreover, the employer may still owe additional employee insurance contributions and employer healthcare insurance contributions in case wage elements are not designated.


Despite the introduction of the work-related costs scheme to simplify matters, practice unfortunately still shows that many employers struggle with the scheme. It is important that allowances and provisions to employees are correctly processed in the payroll administration.

Expatax can help you with this. For more information, please visit

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